MPs expenses: Questions and Answers

The Telegraph's investigation into MPs' expenses has highlighted the range of
goods and services paid for using taxpayers' money. Here we explain how the
system works.

By Gordon Rayner, Chief Reporter

11:30AM BST 09 May 2009

What is the second homes allowance for?

It enables MPs to claim back the cost of running a second home, either in their constituency or in London, by recouping the cost of rent, mortgage interest repayments, utility bills, furniture and household running costs, up to a maximum which currently stands at £24,222.

How do they define which home is their "second" one?

The Green Book states that the second home should be the one where the MP spends the least number of nights in any given year. But officials rarely, if ever, check whether this is the case, meaning many MPs claim their main family home as their "second" home. So the taxpayer foots their biggest household bills while the MP lives cheaply in a small flat or rented room which they say is their "main" home. This is the ruse that got Jacqui Smith into trouble earlier this year.

How often can they change the address of their "second" home?

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There is nothing to stop MPs changing their nominated second home as often as they like. Many of them "flip" their addresses between their London home and their constituency home so they can renovate one house at the taxpayers' expense, change the address and then make improvements to their other house. Others renovate their home, sell it for a large profit, then do the same at their next address to climb the property ladder.

Are they allowed to keep all the profits when they sell their "second" home?

Yes. And many also avoid paying capital gains tax, by telling the tax authorities that their "second" home is in fact their main residence.

Do they have to submit receipts for every penny they claim back?

No. Until recent changes in the rules, no claim under £250 had to be accompanied by a receipt. So many MPs put in claims for £249 for cleaners, handymen, etc.

Do MPs have to stop claiming once they have announced their decision to retire?

No. They can carry on claiming until the day they step down, and several MPs splashed out thousands on renovations even after they had said they were retiring, in order to maximise their profits when the second home was sold.

Can they claim back their council tax?

Yes, but this is another area which is open to abuse. Scores of MPs submitted claims for the full rate of council tax on their "second" home, paid by the taxpayer, meaning they can claim a discounted rate on their main home by telling their local council this is their "second" home.

Can they claim for food?

Yes, if they are meals which they have eaten while staying away from their main home. They do not need to submit receipts (though some do) and can claim a maximum of £400 per month. Some MPs even wait until the end of the financial year and then submit one food claim for £4,800.

How do they prove that portable items, such as furniture, are being used at the second home?

They don't. There is widespread evidence of MPs claiming for furniture for their main home as well as their second home, with some having large items, such as beds and wardrobes, delivered to the "wrong" address.

Are the rules being broken?

The vast majority of MPs are not breaking the letter of the rules – although some are.

However, MPs use a variety of questionable techniques to "milk" the system – including "flipping" the designation of which of two properties is their "second home", buying goods for the "wrong" home, charging for stamp duty, avoiding capital gains tax, renting out a second home, moving up the property ladder by selling second homes, charging for trivial items, overspending on food or renovations, and doing up properties just before standing down from parliament.

Why is this scandal happening now?

A year ago the High Court backed an earlier ruling by the Information Tribunal that full details of MPs' expenses, including receipts, should be made public.

Since then MPs have been accused of dragging their feet and playing for time. Full details are slated to be published in July but with some crucial details – such as addresses of second homes – blacked out. An investigation by the Telegraph has uncovered the full files.

What happens next?

MPs face pressure to release the full details earlier than planned – a move called for by Alastair Campbell, the former director of communications at Downing Street, and Charles Clarke, the former home secretary.

The revelations have unleashed a tidal wave of public anger against MPs who play the system. Gordon Brown, the Prime Minister, will face further calls to liaise with other party leaders and introduce urgent changes to the system, particularly regarding the ACA.